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Big League Economics

Gunter: Trump must back ITC to stop South Koreans unplugging U.S. appliance industry

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Samsung and LG, who are Korean corporate giants in the appliance and consumer electronic industry, have each pledged large investments in the United States. But a new report from the International Trade Commission casts doubt on whether they’ll follow through unless economic safeguards are implemented.

These investments would come in the form of two home appliance manufacturing plants — a $380 million Samsung factory in South Carolina and a $250 million LG factory in Tennessee.

While the commission’s report acknowledges that the communities housing these plants  would eventually benefit, it concedes that without safeguard relief, these investments might not be fully realized.

“In the absence of safeguard relief, however, LG and Samsung would have less of an economic incentive to follow through fully on their planned investments, particularly in light of their substantial recent investments in LRW production for the U.S. market in Thailand and Vietnam,” the ITC report states.

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Without economic protections in place, more and more companies may choose to move their operations abroad. In a recent example, Mondelez, Rexnord and Brake Parts Inc. relocated their manufacturing operations from the United States to Mexico — taking full advantage of low labor costs and lax regulations.

An exodus of American manufacturing is completely unacceptable.

In order to provide “safeguard relief,” the ITC’s report recommended that a graduated tariff be placed on all imports of washing machines above a 1.2 million unit threshold. Initially, the tariff would start at 50 percent, decreasing to 40 percent by the tariff’s third year.

Proponents of global free trade might balk at such a measure, citing a level playing field for all. However, Samsung and LG already have unfair advantages over their competition in the United States.

In one instance, South Korea’s central government gave Samsung a direct subsidy of $155 million, violating international trade law and giving the corporation a significant advantage over its competitors.

If the economic measures recommended by the ITC were enacted, corporations like Samsung and LG would have a greater incentive to invest in American manufacturing — providing more jobs for American workers.

Additionally, the United States currently has a trade deficit of $19.8 billion with South Korea. Countering unfair behavior by South Korean firms would dramatically help bring the trade deficit into balance.

President Donald J. Trump is expected to make a decision on implementing the graduated tariff by early 2018. Should he cooperate with the office of the United States Trade Representative to enact the ITC’s recommendation, it would certainly fulfill his “America First” campaign promise.

Otherwise, if economic protections are not established, more and more companies may choose to move their operations overseas.

 

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